Design Indiana’s tax system from scratch

If you’re like me (spoiler alert: you probably aren’t), you’ve spent a lot of time thinking about how you would fund government if you were building Indiana from scratch.

Maybe you’re a person who thinks property taxes are evil and should be abolished. Maybe you aspire to eliminate all individual income taxes like Florida and a handful of others. Maybe you want to go the Delaware route and charge no sales tax.

But how much would that cost the state? How would you make up the revenue? And who really wants to do all that math.

Now, thanks to Indiana Explained, you don’t have to. We’ve created a tool to help you figure that out.

We took the largest chunks of state revenue as well as property taxes (as recorded in the indispensable Indiana Tax Handbook), and created a simple calculator to help you build your own tax structure.

The state tax system is quite complex, so there are limitations with our formula. Read them in the footnotes below. But we hope this can at least give you an idea of scale when comparing revenue streams. Feel free to leave suggestions or point out mistakes in the comments or on our Contact Us page.

The scale starts where the current tax rates are. Moving them to the right creates a higher tax. Moving them left creates a lower tax. If you want to start over and don’t remember the current rate, just refresh the page.

The tax rates you choose are multiplied by a constant base. In real life, higher or lower tax rates will change behavior (i.e. buying less cigarettes or goods, employing more people, etc). We aren’t about to predict those changes, so you get what you get.

Several different gaming rates are included in that section, so instead of having you slide gaming taxes around, I just gave you the revenue number and you can change it if you want to soak the casinos.

What happened to the 1-2-3 property tax caps enshrined in our state’s constitution? Since all different parts of the state have different rates, we just took the net tax levy for the entire state divided by the net assessed value for the entire state.

The original version of this calculator left out local option income taxes. But because all the optional income taxes are being combined into one next year, it made things easier on us. We took divided local income tax revenue by taxable income to get an average state rate of 1.18%.

Want to have a tiered income tax? Sales tax on services? County option sales tax? Tough luck. Maybe we’ll add that to the calculator in the future, but for now you have to work within the confines of the current structure.

The Total is the amount of revenue generated form these taxes in Fiscal Year 2015 and accounts for the vast majority of state revenue. Federal aid, non-tax revenue, and other minor taxes are not included.